Two tech giants get an upgrade in vulnerable September

Facebook & Alphabet, Weekly

September is traditionally one of the most volatile and weakest months for equity markets. It is the final month of the third quarter and historically it is essentially tied with August as the worst month of the year for US markets. As Jeff Hirsch and the authoritative StocktradersAlmanac.com¹ point out; “Since 1950, September is ranked last for DJIA, S&P 500, NASDAQ (since 1971) and Russell 1000 (since 1979). Small caps, measured by the Russell 2000, have fared slightly better, but historical average performance is still negative. Over the last 21 years, September has generally opened tepidly with mixed performance depending on index with Russell 2000 often rising the most through mid-month. However after mid-month, any gains have tended to fade quickly and turn into losses by month’s end. Sizable losses in 2001, 2002, 2008 and 2011 weigh heavily on average performance.”

2021 has fared little differently as we enter Trading Day 13 and the end of week 2, with a move higher in the early days of the month followed by a subsequent decline and recovery. Weeks 3 and 4 tend to prove particularly weak as the above chart for the last 20 years shows.

The USA30 is the weakest of the three major indices, having traded below its 21- day EMA for 8 consecutive trading days, while the USA100 is the best performing having closed under the 21-day EMA for the first time this week on Tuesday (September 14) only to recover on Wednesday. The USA500 has been below the 21-day for EMA 5 consecutive days.

Against this background, this week has also seen the Apple product launch, which was largely disappointing for the tech aficionado’s, but has seen significant pre-orders for the new iPhone 13². Apple’s share price remains under the 21-day EMA and psychological $150.00 following last weeks Epic Games ruling, which could still have many, many weeks to run³. Also two technology giants, Facebook (#Facebook) and Alphabet (#Alphabet-A),  have had major upgrades today. Leading equity research analyst Jefferies have increased their target price for Facebook to $440 from $425 and for Alphabet to $3,325 from $3,150, following an upgrade from Goldman Sachs earlier this week that pushed their target price for the search engine giant to $3,350. At close yesterday, September 16, #Facebook was trading hands at $373 a share whilst #Alphabet-A closed at $2,872. So although the short term outlook may be volatile and negative for equities, with possibly more to come in October, the medium term outlook remains positive and well supported in the higher timeframes.

¹https://jeffhirsch.tumblr.com/

²https://www.cnbc.com/2021/09/16/apple-iphone-13-pre-orders-show-signs-of-growth-in-china.html – but saw 

³https://www.marketwatch.com/story/how-long-might-it-take-to-resolve-the-epic-apple-case-expect-a-legal-marathon-11631809536?siteid=yhoof2

https://www.jefferies.com/ResearchandAnalysis/Equity-Research/2/75

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Stuart Cowell

Head Market Analyst

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